Strategic Hotel & Contract Negotiations, Part 2

Presented by

Robyn Mietkiewicz, CMP, CMMDirector, Global Meeting Management

Services

Meeting Sites Resource

Moderated by

Tyler DavidsonChief Content Director

Meetings Focus

Wednesday, March 26, 2014

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Today’s Speaker:

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Meeting Sites Resource

rmietkiewicz@meetingsites.net

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@MSR_Global

Learning Objectives

• Understand why hotel contract risk reduction / cost containment

has become an important value metric

• Review key hotel contract clauses and risk mitigation tips

• Know how to reduce, or eliminate, hotel fees and surcharges

• Discuss dispute resolution methods/hotel audit process

• Examine how to create a risk reduction/cost containment report,

from your countersigned contract

Strategic Hotel & Contract

Negotiations, Part 2

Breaking Barriers

Presented By

Robyn Mietkiewicz, CMP, CMM

Director, Global Meeting Management

Meeting Sites Resource

Confidential and Proprietary Information

@MSR_Global Meeting Sites Resource

State of the Industry

• Continued hot seller’s market

• Increase in hotel fees and surcharges

• Challenging to book short term meetings

• Negotiations plan is essential to success

• Pro-active hotel contract negotiations strategy is a must

• Increased expectations by senior management for improved

planner productivity and ROI

• Meeting planners focus on meeting value reporting

• SMM technology is critical to meeting consolidation and data

management

Hotels Total Focus Is On… • Sleeping Room Block / Revenue – biggest profit center at 77%

gross profit

• Peak Night Pattern / Flexibility – all hotels focus on pattern

selling, by market

• Group Food & Beverage / Revenue – second biggest profit

center at 38% gross profit

• Room To Space Ratio – hotels use meeting space to sell total

group rooms inventory

• Ancillary Spending – projected revenue for business center, AV,

production, Internet, golf/spa, sponsored events / ICW revenue,

etc.

• Meeting History – 3 to 4 years

• Season / demand over your date(s)

• Other groups in-house / their revenue contributions

Hotel and Contract Negotiation Strategy

•Assure risk reduction and cost

containment measures

•Enhance added meeting value and

measurable cost savings

•Make mutual obligations and

responsibilities perfectly clear

•Have an easy path and process for

dispute resolution

•Achieve open and honest

communications and negotiations

Create a Custom Master Hotel Contract Template /

Amend For Each Meeting

Include:

All hotel contract components and clauses

Value added concessions (must have vs. nice to have)

Hotel fees and surcharges (eliminate or reduce)

Performance clauses (do the math and calculate on profit, not

revenue)

Legal department liability language (indemnification, insurance,

successors and assigns, dispute resolution / arbitration, etc.)

Generate a cost savings / risk reduction report for each meeting

(from countersigned contract)

Sleeping room attrition

• Guarantee a percentage of total room block, with no sliding scale

• Negotiate a cut-off date that works with your group history

• Add resell clause vs. liquidated damages

• In the event of damages, calculations on profit not revenue

GUEST ROOM REVENUE COMMITMENT

We are relying on, and you agree to provide, a minimum dollar amount of guest room revenue

(exclusive of food and beverage charges, meeting room rentals, and other non-room charges)

equal to the number of room nights set forth above in Section 2 multiplied by your $ 359.00

room rate, exclusive of taxes. From the Effective Date until 14 days prior to your arrival, you

may reduce your guest room revenue commitment by 10% PER NIGHT without charge. The

balance equals your “Room Revenue Commitment.”

If your Room Revenue Commitment is not met for reasons other than cancellation of your

event, you will be charged for the difference between the Room Revenue Commitment and

your actual guest room revenue plus all applicable taxes.

The parties agree that the amounts described above are a fair and reasonable estimate of our

damages resulting from non or partial use of the Room Block and that such amounts do not

constitute a penalty.

Under no circumstances may you transfer or resell your rights under this Agreement to any

third party room reseller or broker for purposes of reselling unused rooms.

Example

Meeting Cancellation

• Present performance clauses that are fair to organization and hotel

• Sliding scale damages and do the math

• Base damages calculations on profit, not revenue

• Include a mitigated damages / resell clause

• In the event of damages, apply percentage to a future meeting

• Advanced deposits / refundable or applied to damages

Food & Beverage Guarantee

• Verify F&B spend from last year’s meeting

• Benchmark estimated F&B projection

based on meeting agenda, number of

attendees and average menu prices

• Hotel F&B guarantee does not include

service charge and sales tax

• Contracted guarantee to include 20%

allowable attrition

• 45 days out, assess your attendance and

actual F&B spend

Published Rate Clause (No lower rates offered after contract is signed)

Protects your company if meeting attendees make reservations

around group room block (via Internet/discount web

sites/telephone call in)

No lower rates offered once the contract is signed (excluding

airline and wholesale travel rates)

If the individual is an attendee of the Group’s meeting and has

a documented reservation in-house at the hotel, regardless of

the room rate, the Group will receive credit for attrition

purposes.

Performance Clauses

Fees/Surcharges

Negotiate: eliminate or reduce hotel fees and surcharges

Resort fee F&B Surcharges

Early departure fee Maid / Bellman

Parking Telephone / Internet access

Health Club Meeting room rental / set-up charges

(complimentary based on guaranteed room

block / minimum F&B / no sliding scale)

Breach By Hotel

• Hotel is responsible to pay damages to

your organization if they cancel or do not

perform

• Hotel to pay all direct and indirect costs to

relocate your meeting to another hotel and

or city

• If the room rate is higher than your existing

contracted rate, the hotel is to pay the

difference.

• Hotel to pay expenses and costs relating

to marketing materials and attendee

communications

• Hotel liable for any legal or arbitration fees

• Planning organization to document all

costs

“Walking” confirmed reservations occur

when hotel is oversold

Relocation clause/financial

responsibility if your guests are

“walked” when hotel oversold

Guest relocated to hotel of

similar/better quality at hotel’s

expense

Hotel to provide transportation /

priority wait list to return / suite

upgrade based on availability

No Walk/Relocation

Construction and Remodeling

Does not allow hotel to conduct

renovations that impact your meetings

Hotel to notify group if any construction,

maintenance, remodeling, repairs that

may be in effect over your

meeting/room block dates Group has right to cancel without penalty and/or receive compensation if

construction, maintenance, appearance or noise affects meeting

Group reserves right to request construction, maintenance, repairs to be

stopped during their meeting dates (state specific meeting dates in contract)

If group does cancel due to construction, maintenance and repairs, all

deposits will be returned to group in full within 30 days

Force Majeure

Allows company to cancel meeting based

on factors out of your control

Specific terms and conditions which either

group or the hotel can cancel the meeting

without financial responsibilities

Events out of control of parties including

but not limited to flood, earthquake, fire,

war, terrorist attacks, World Health

Organization (WHO) alerts, curtailment of

transportation, labor strikes and

government regulations

Anything that makes it impracticable, illegal

or impossible to perform

If customer still elects to conduct meeting,

no attrition, food and beverage guarantees

apply

Group rate honored 3 days prior & post meeting

dates

Complimentary / discounted food & beverage

functions

Discount on staff rooms Complimentary / discounted parking

Complimentary rooms ratio / cumulative (start 1

per 40)

Discount off printed banquet menus

Daily complimentary continental breakfast / AM &

PM breaks in staff room

Complimentary suites Discount off printed AV prices

Suite upgrades by category Waive / discount resort fee

Club floor upgrades at group rate Complimentary entry to health / fitness club

Complimentary/discounted hospitality suites

VIP Transportation

Complimentary signage outside each meeting

room / meal function / speaker ready room

VIP in-room amenities

Late check-out for VIPs / staff

No charge for signage, easels, tables, podiums,

risers, lecterns, wastebaskets, recycle baskets

Discount off Master Account (for larger meetings

or payment at departure)

Complimentary acceptance & storage of boxes /

product / materials 3 days prior to meeting

No early departure fees Complimentary / discount Internet fees

Value Added Concessions

Prioritize for each meeting based on specific needs and meeting value

Liquidated Damages

Liquidated Damages calls for a specific dollar amount or formula to

calculate a specific dollar amount to be paid to the hotel in the event of

non performance

• Cannot be excessive or could be deemed a penalty

• Must clearly state the formula or date(s) due

• Hotel is not obligated to resell rooms and credit the group

Mitigated Damages

Mitigated Damages are the hotels responsibility to resell sleeping rooms,

meeting space and contracted services to reduce or eliminate damages

• In the event of attrition or cancellation notify the hotel in writing

• Check contract performance dates to calculate damages amount

• After meeting dates, conduct a hotel audit to verify occupancy and number

of rooms and services resold.

• Assure all resold rooms and services, regardless of rates are credit to your

account

Hotel Audit

In the event of performance damages, audit process includes:

Request a hotel room inventory / occupancy report by night

Verify how many rooms were resold (individual or group, regardless of room

rate)

Verify how many rooms by night were out of service due to renovation or

repair

If attendees made their own hotel reservations (versus rooms on master),

provide hotel with an electronic registration list to cross reference against all

in-house guests over the meeting dates

Capture any pre or post room nights

Sleeping Room Rates

Concessions

F&B Comp / Discounts

AV / Production Discounts

Hotel Support Services

Meeting Space / Set Up Fees (only for space intense meetings /

multiple day set up / tear down)

Internet Comp Discounts

Hotel Fees & Surcharges (eliminate or reduce)

Preferred Suppliers / Volume Buying

Master Account Discounts (for larger meetings)

Cost Savings Report, By Meeting

Meeting Consolidation / Leveraged Spend

Name of Meeting Meeting Dates Hotel Rooms

Contracted

Rooms

Picked-up% +/-

Actual

Rooms

Spend

inclusive of

tax

Actual F&B

Spend

Total Room

& F&B

Spend

Cost Savings

2011 – Auto Lending

ConferenceMay 9 – 14, 2011

Marriott Newport

Beach Hotel & Spa410 378 92% $61,504 57,325 $118,829 $34,928.60

2011 Strategy Meeting Aug 24 - 26, 2011Marriott Newport

Beach Hotel & Spa22 29 131.82% $5,191 $2,658 $7,849 $502.00

2011 - East Coast

Annual Auto Lending

Users Conference

Sep 12 - 17, 2011Renaissance

Arlington Capital240 290 120.83% $58,837 $40,859 $99,696 $22,811

2012 Managers

MeetingJan 23 - 27, 2012

Embassy Suites

Ontario Airport174 199 114.37% $21,691 $19,452.50 $41,144 $6,898

2012 Las Vegas

Conference

Jan 31, 2012 - Feb 7,

2012

Cosmopolitan

Resort & Spa160 147 91.88% $32,018 NA $32,018 $5,081.25

2012 - Auto Lending

Users ConferenceMay 14 - 19, 2012

Westin Chicago

River North599 566 94.49% $151,543 $88,000 $239,543 $98,030.95

2012 - National Sales

Meeting June 26 - 30, 2012

St. Louis Airport

Marriott384 345 89.84% $33,725 $53,076 $86,801 $30,107

2012 Councils

Meeting Sep 24 - 28, 2012

The Cosmopolitan

Las Vegas150 118 79% $21,942.00 $14,140.00 $36,082.00 $4,276

2013 Annual Lending

ConferenceMay 19 - 25, 2013

The Cosmopolitan

Las Vegas803 747 93% $164,764.00 $50,000.00 $214,764.00 $23,965.50

TOTALS $551,215 325,510.50$ $876,726 $226,599.95

Average Cost Savings Per Meeting = $25,178.00

ABC CompanyMEETING ANALYSIS (2011 - 2013)

Key Risk Reduction /

Cost Containment Components Recap

Sleeping Room Rates

• Rate integrity process

Value Added Concessions

• Prioritize for each meeting

Published Rate Clause

• No lower group rates via website after contract signing

Attrition

• Guarantee percentage of room block / no sliding scale fees / damages based

on profit not revenue

Cancellation

• Sliding scale damages on profit not revenue / resell / if damages, apply to

future meetings

F&B Guarantee

• Allowable attrition

Hotel Fees & Surcharges

• Eliminate or reduce

No Early Departure Fees

• Covered by Attrition

Key Risk Reduction /

Cost Containment Components Recap

Resell / Audit

• Resell / credit accountability, percentage of damages applied to future meeting

Relocation

• Accountability when attendees “walked”

Construction / Remodeling

• No construction or renovations over meeting dates that impact meeting, image, logistics,

guest experience

Unauthorized Changes

• Hotel not to change or alter contracted room block, meeting space, services without

written approval

Meeting & Event Space

• Complimentary / no sliding scale fees

Force Majeure

• Termination without damages

Breach By Hotel

• Failure to provide services as agreed render Hotel liable for direct & indirect damages

Legal Department Language

• Indemnification, insurance, dispute resolution / arbitration, bankruptcy, successors &

assigns, etc.

Plan and Think Before You Ink

• All hotel contracts are negotiable (plan and prioritize before you negotiate)

• A thorough and well designed contract is essential for a successful meeting

• Stay away from vague phrases such as ample, reasonable, to be assigned,

appropriate, etc.

• All meeting and event space to be assigned by day (if a hotel will not assign

specific space, they are not considered a candidate)

• There is no contract until both parties have signed the document

• Written changes on the contract with date and initials represent a

counteroffer

• Discuss areas of dispute and counter offers in an open and honest manner

• Negotiate an option date to sign and return the contract

• In the event of changes to the meeting dates, room block, suites, meeting

space or hotel services, create a hotel contract addendum, detailing changes

and secure mutual signatures.

Thank YouPLANNING RESOURCE:

Hotel Contract Top Ten Tips

Robyn Mietkiewicz, CMP, CMM

Director, Global Meeting Management

rmietkiewicz@meetingsites.net

Meeting Sites Resourcewww.meetingsites.net

Twitter:

@RMietkiewicz

Robyn Mietkiewicz, CMP, CMM

Director, Global Meeting Management

Services

Meeting Sites Resourcermietkiewicz@meetingsites.net

Tyler Davidson

Chief Content Director

Meetings Focustyler.davidson@meetingsfocus.com

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Strategic Hotel & Contract Negotiations,

Part 2

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